Michael McCarthy, IFDA director of research and education, noted that since distributors' bottom line is only 1.2%, difference of 0.3% or 0.2% between high performers and low performers affect the bottom line and increase profitability.
DSRs are spending quality time with customers and penetrating existing accounts better. |
This year's report, for the first time, examined the sales mix of the responding companies, which generally were IFDA members, including independent accounts, multi-unit regional chains, and national systems business. Higher performing companies showed a larger percentage of their sales coming from independent operators and a lower percentage of sales from systems business.
Higher profitability companies rang up 55.6% of their sales with single-unit independents and lower percentage with multi-unit accounts, while lower profitability companies split their sales evenly between both segments.
While sales growth was positive throughout the sampling, the patterns of growth in the higher profit firms revealed that the customer mix of the distributor does play a role in overall profitability.
"It looks like higher margin independents can drive profitability," McCarthy said in an interview with ID Access.
Noting a change in the relationship among distributorship, DSR and customer, McCarthy said the average number of customers per DSR for all distributors in the survey was 75.6 but high profit firms' number was 53.2. He said it seems that higher profitability companies are working more closely with their customers, are successfully penetrating existing accounts and enforcing minimums.
The more profitable companies also had an average of 14.1% more sales per customer than all of the participating companies.
"DSRs are spending quality time with customers and penetrating existing accounts better. Moreover, as we heard at the IFDA Sales and Marketing Conference, the DSR of the future is becoming more consultative," he added. "With larger sales per customer and larger drop sizes, the higher profit companies are able to reduce costs through economies of scale. That's a way for managing expenses."
The study also showed that higher profitability distributors turned their inventories 14 times while low performers turned them 13.1 times. McCarthy added that this difference has been diminishing over the past few years.
HIGH PERFORMERS CONTROL EXPENSES BETTER The high performers also seemed to control their expenses better versus low performers and the industry in general, he said. Payroll expenses were 8.1% of sales for high performers and 8.4% for low performers; warehouse expenses accounted for 2% of sales for the former group and 2.4% for the latter; delivery expenses were 3.2% of sales per customer for the high performers and 3.5% for the bottom half of respondents; and the cost of delivery per customer for the high performers was $32.50 and $34.60 for all of the respondents.
McCarthy interpreted this as indicating that larger companies are growing more aggressively and they are working more diligently with their sales forces.
"When you tie this with some other trends that we see in the industry, such as the DSR of the future becoming more consultative, those companies that are doing this are the ones that are achieving success in profitability and growth," McCarthy said.
Overall, the results bode well for foodservice distributors and the hospitality industry, he underscored.
"It tells me that companies in this study are doing quite well and the results are very positive. I'm generally optimistic about the foodservice distribution industry and foodservice as a whole," McCarthy said. "Despite problems in the economy that were created by natural disasters, people are still visiting foodservice establishments. The outlook for foodservice distributors is extremely positive and the numbers that were reported in the study bear that out."
The full study can be purchased by visiting IFDA's website.
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